The Hard Questions About Reverse Mortgages

January 22, 2013 · Print This Article

Reverse mortgages can serve a number of purposes, the most common one being to provide for a better retirement using the equity in your home. Even with all the benefits, there can be some trepidation from consumers when they consider reverse mortgages. The “what ifs” are numerous, and any reputable reverse mortgage agent and your lawyer will make sure that all your questions are answered before you sign on any dotted lines. Here are a few “what if” scenarios and the answers to them.

What Happens if My Spouse Dies?
This is why it is important that the reverse mortgage be taken out in the names of both partners who own the home. Your lawyer will also review steps with you to be taken to ensure that the home and responsibility for the loan are properly transferred to either spouse should one of you pass away. If you both pass away, it is a requirement that the home is sold and the loan repaid, although you can make alternate arrangements to repay the loan with Horizon Equity at the time that you take out your reverse mortgage if you wish. It is important to take these steps at the beginning, as the loan agreement can’t be renegotiated once it is made.

What if I Have to Move?
If you have to move suddenly for any reason at all, you can still sell your home. You still own your home, CHIP is only registered on the title of the home to secure the reverse mortgage loan. It is, however, still required that you repay the loan from the funds from the sale of your home if you have to move, regardless of the circumstances.

Can My Spouse Move Into a Retirement Home?
Many of our clients take out reverse mortgages in order to make renovations to their home or bring in outside help specifically to avoid moving into a retirement home. However, if you find that one of you need to move into a retirement home at any point, there is no change to the loan agreement. It is only when you sell your home that the reverse mortgage must be repaid.

What if My Property Value Decreases?
The terms and amount of the loan stay the same if your property value decreases. The agreement between you and the reverse mortgage holder is not changeable according to property value fluctuations or even interest rate fluctuations. Many seniors choose a reverse mortgage at today’s low rates to insulate themselves against having to take out a higher-interest home equity line of credit or other product in the future.

Additionally, you are protected if the value of your property ends up being below the amount of your CHIP home income loan; you are only required to pay the value of your home at the time of sale, even if the amount of your CHIP home income loan is larger than the value of the home. This insulates your estate against any fluctuations in property value.

Can I Pay Off My Loan in Advance?
You may repay your loan at any time you choose, however no payments are required until you actually have to sell your home.

It’s important to note that part of the process of taking out a reverse mortgage involves consulting your own lawyer, who will address all of your concerns in private consultation with you. If your concerns are not addressed by the loan agreement, your lawyer will tell you what you need to do in order to ensure that the agreement meets your needs.

Horizon Equity wants to keep the reverse mortgage process as transparent as we possibly can. Contact us today with your hard questions about reverse mortgages, and we’ll give you the answers.